Women and Money: Why You Need to Take Control Now

The good news: More than a third of American women are now the family breadwinner (look at that!). The bad news: We still tend to pass the buck on important money matters, such as investing and retirement. Ready to take charge of your financial future? Start right here.

I paid bills on time. I bargain-shopped like a pro. I watched my wallet. So at age 21, working at my first job, I thought I had my act together when it came to my finances. Until I spoke to Joe, an older coworker, who discovered that I had not signed up for the 401(k) retirement plan offered by our company. He was appalled. Speaking slowly, my well-meaning colleague explained that if I participated in the plan, the company would match my contributions. When I stared at him blankly, he bellowed in frustration, “It’s free money!” Then he tried impressing me with numbers: By investing less than $100 per paycheck, I could eventually accumulate a nest egg of a million dollars or more. Again, crickets. The more he went on about the magic of compound interest, the more he sounded like the teacher on the cartoon Peanuts. I was bewildered. What does 401 even stand for? And, for that matter, (k)? To get my colleague off my back, I halfheartedly promised to look at the paperwork.

I dithered and kept putting off enrolling before finally keeping my word—one decade later. Signing up for a 401(k) was a bizarre psychological hurdle I couldn’t get over. But why?

I was part of a phenomenon that some money experts have dubbed “the female financial paradox.” Translation: Like millions of other women, I was perfectly happy to pinch pennies and hunt down sales, yet I couldn’t muster the slightest interest in big-picture financial planning.

What the heck is going on here? We women are hardly meek and passive in our careers. We have more power and earning potential than ever before. We’re graduating with more college degrees than men, and we’re climbing farther up the ranks in nearly every industry. Nor are we shrinking violets regarding everyday financial affairs. One survey found that a full 90 percent of women identify themselves as the chief bill-payer and shopper for the household. And yet we lag behind men in actions crucial to building wealth and security, such as investing and having a long-term money plan.

“Because we’re fighting against centuries of societal norms in which women were excluded from discussions about finances, many simply aren’t interested in these topics,” says Amanda Steinberg, the CEO and founder of the women’s personal-finance community DailyWorth.com. Eileen O’Connor, the vice president of wealth management for McLean Asset Management Corporation, in McLean, Virginia, agrees. She says that, traditionally, women have had a “head-in-the-sand approach” to long-term financial planning. No wonder a recent survey conducted byDailyWorth.com found that 60 percent of women thought their investing and planning skills were below average.

That lack of engagement has a high cost. According to the Employee Benefit Research Institute, a nonprofit based in Washington, D.C., roughly the same number of full-time employed men and women participate in retirement plans. However, men contribute far more to those plans: Their median account balance is $31,388, compared with women’s $20,877, according to Vanguard, an investment company. One would hope that women’s savings would be inching toward parity now that the gender pay gap is becoming a relic. Alas, no. The female financial paradox has continued unabated.

Experts have identified four key factors underlying the paradox: Women tend to be insecure about the subject of money; we focus on scrimping instead of investing; we rely too heavily on others for financial know-how; and we’re not always adept at translating abstract figures into concrete goals. Read on to learn more about these barriers and how to overcome them.

Financial Barrier No. 1: We Lack Confidence

Odd, isn’t it? So many women radiate competence and authority on a daily basis (brilliant doctors, strong managers, cool and collected stay-at-home mothers). But when it comes to this one particular subject, not so much. Take Amy, a 42-year-old senior manager based in New York City. “Money information just bounces off my brain,” she says. “It’s like I have a force field that won’t let it in.” She’s not alone. With the exception of women who work, say, on Wall Street or in accounting, even some of the most capable among us can become champion self-doubters when we have to talk about our money.

Experts say this is an understandable reaction to the relative inaccessibility of the male-dominated financial world. Take a peek at any mutual-fund prospectus and you’ll find tons of abstruse language: 12b-1 fee, market capitalization, front-load, back-load, no-load. Some men may savor the jargon and feel a sense of pride when they master it, whereas women tend to see it and shut down, explains Galia Gichon, the founder of the women-focused financial-education firm Down-to-Earth Finance, in Westport, Connecticut.

Gichon recalls working with a successful single mother in her 40s who didn’t have any long-term savings and refused to start planning for retirement. “The concept felt so overwhelming that she thought, Why bother? As a result, she ignored her big-picture finances completely,” says Gichon.

That desire to flee from financial planning means we aren’t always as well-informed as we should be. “Many women think that since they don’t know the language, they can’t ask questions—or they worry that their questions sound dumb,” says O’Connor.

Those fears may be reinforced by frustrating encounters with the financial-services industry. For every helpful and plainspoken adviser or planner, there’s another who can be intimidating or condescending. “Women tell me that their adviser talked about things they didn’t understand or spent the entire appointment speaking to their husband,” says O’Connor.

If money discussions make you feel nervous or clueless, you have to start talking about your finances more, not less. “To eliminate the intimidation factor, include topics of spending and saving in your regular conversation with your spouse or a trusted friend,” says New York City–based financial therapist Amanda Clayman.

It also helps to have an adviser you can depend on, even if you contact her only once a year. Make sure your money pro speaks clearly, without excessive use of jargon or acronyms, and that you feel 100 percent comfortable talking to her.

The other thing that will give you more confidence in money matters? Knowledge. For starters, review your financial statements on a monthly basis so you know where you stand. Then consider picking up a personal-finance book or visiting a money-information website to school yourself in any concepts that are eluding you.

Financial Barrier No. 2: We Sweat the Small Stuff

For women, being smart with money traditionally meant knowing how to stretch the family dollar. (Think of all those ladies who managed to turn out amazing multicourse meals during the years of World War II rationing and victory gardens.) “For generations, the idea was that men earned the money and women decided how to spend it,” says Laura Vanderkam, the author of All the Money in the World: What the Happiest People Know About Getting and Spending ($27, amazon.com).

Today not much has changed. Women still make most of the household purchases, and many are master deal finders. The overwhelming majority of women—76 percent—regularly clip coupons, and 38 percent buy in bulk, according to a recent Citi Economic Pulse survey. “Sales and coupons provide the instant gratification of saving,” says Gichon.

“When they find themselves hitting up the sale racks, women need to remember that even the best deal they find is worth far less than a smart investment in their retirement fund,” says Eleanor Blayney, the president of the Washington, D.C.–based financial-advisory firm Directions for Women. While there’s certainly nothing wrong with getting your money’s worth, experts say that women need to move beyond worrying about nickels and dimes and start thinking big.

Remember that the Mad Men era wasn’t that long ago. Most women were raised to believe that their husbands would handle the finances. Few people now in their 40s and older were raised by mothers who were the key financial decision-makers, says Gichon. “Often neither parent counseled daughters about saving or investing,” she says. And even some women in their 30s or younger have grown up “with the idea that they would be secondary earners and a man would be responsible for investing and long-term saving,” says Vanderkam.

Single women raised with this mind-set typically learn to take charge of their finances out of necessity, experts say. But even today some married women ignore such issues until they are forced to pay attention. For many, that reckoning may come when they are least emotionally prepared to deal with it: after they lose a spouse through death or divorce. “Unfortunately, for many of my clients, it takes a major life event to change their behavior,” says Gichon.

Financial Barrier No. 4: We’re Focused on Goals, Not Numbers

In the financial world, a great deal is made of the bold-faced number on your bank statement. And certainly women want to make money as much as the next guy. But we’re after a lot more than just a fat (but abstract) figure in our investment accounts, says Clayman. “I don’t care about how much money I have on paper,” says Sarah, a 33-year-old writer. “I want to know if I can make the choices that are important to me.” Can I afford to buy a new home? Send my children to college? Travel after retirement? These are the concrete goals that matter the most to us. “And that means the financial conversations about saving and investing that we have with our planner or spouse need to be directly connected to the results we want to see in our lives,” says Clayman.

That’s why it’s best to think specifically about what you would do with a pot of money. Make your financial goals as detailed as possible (including an estimated cost) to increase the likelihood that you’ll follow through with what’s necessary to achieve them. For example, Clayman recalls a woman in her 40s who couldn’t kick-start her retirement-savings plan until she envisioned spending her golden years in Florida. “Once she calculated what she needed to accomplish that target—as opposed to a large, vague amount she had to save—she became less anxious and more proactive,” says Clayman.

Being financially savvy doesn’t have to be about making more money just to increase your account balance. “Think of money as a tool to help achieve your goals, take care of yourself, and do things for the people you love,” says Vanderkam. “It’s a means to getting the life you want.”